31 August 2011

Reader riposte: Australia and Antarctica

20 August 2011

Who’s Really Stealing Company Assets?

...KPMG’s latest white collar crime study shows that even if most executives are honest, the dishonest among them account for the largest chunk of the problem. Put another way, while the typical executive may not be a swindler, the typical swindler is in management, especially senior management. Staff cause the problem only 18 percent of the time.

The reason for this is obvious. Executives have the access to financial assets, and ironically, they are the ones whom everyone else, including security, tends to trust most and watch least. Weak internal controls were exploited in 74 percent of the cases (spanning 69 countries) that KPMG examined. In 50 percent of those cases, red flags (such as missing documents or complaints from suppliers) were ignored.

07 August 2011

The debt deal's biggest losers

The debt-ceiling debate feels like one of those tragic episodes out of the history of the fall of republics. To gain their point on a budget matter, Republicans did something unprecedented in the annals of American government. They made a bargaining chip out of the public credit of the United States. In a well-functioning democracy, certain threats are just not used, and the threat to force the country into default should rank high on the list of unacceptable threats.

Yet congressional Republicans not only issued the threat, they did so successfully. They have changed the rules of the game in ways that will have ramifications for a long time. Maybe Democrats will copy them. Or maybe Republicans will do it again. Either way, something that was once unthinkable has become thinkable. Any holder of U.S. government bonds has to feel a little less confident of the security of his or her investment after this summer's debt-ceiling episode.

02 August 2011

The enigma of government debt

Intra-governmental debt is something of a misnomer: $4.53 of it is really money owed by the government to the American people. The biggest single number in sight, $2.40, represents what Americans have collectively set aside for retirement, or Social Security. This $2.40 is a surplus, collected over decades, as the total revenues from Social Security payroll taxes have exceeded the total amount being paid to beneficiaries. This surplus has been invested in the government, where it counts towards the total debt. The psychological impact of this language game should be clear. What ought to be celebrated as sound financial planning appears instead as further evidence of reckless profligacy. The more money we save, the poorer we are told we are. There is also $1.68 in savings for health care and $0.40 dedicated to needs such as highways, housing, the disposal of nuclear waste and unemployment insurance.